Why does an SDF model moved through /gazebo/set_model_state service doesnt colide with objects

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Hi, I am moving an sdf cube setting its state through the /gazebo/set_model_state service, through python. The SDF is as follows, and is spawned through the gazebo/spawn_sdf_model service. I have tried it with and without the inertial component:

<?xml version="1.0"?>
<sdf version="1.4">
    <model name="piece">
        <static>True</static>
        <link name="link">
            <!--
            <inertial>
                <mass>0.001</mass>
                <inertia>
                    <ixx>0.0000001667</ixx>
                    <ixy>0</ixy>
                    <ixz>0</ixz>
                    <iyy>0.0000000667</iyy>
                    <iyz>0</iyz>
                    <izz>0.0000001667</izz>
                </inertia>
            </inertial>
            -->
            <collision name="collision">
                <geometry>
                    <box><size>0.5 0.5 0.5</size></box>
                </geometry>
                <surface>
                    <friction>
                        <ode>
                            <mu>0.4</mu>
                            <mu2>0.4</mu2>
                        </ode>
                    </friction>
                    <contact>
                        <ode>
                            <max_vel>0.1</max_vel>
                            <min_depth>0.0001</min_depth>
                        </ode>
                    </contact>
                </surface>
            </collision>

            <visual name="visual">
                <geometry>
                    <box><size>0.5 0.5 0.5</size></box>
                </geometry>
            </visual>
        </link>

    </model>

</sdf>

Its moving perfectly but when a standard cube is placed in its trajectory, it just crosses as if it wasn't there. But if the movement stops and I move the standard cube a bit , then the collisions come into place.

Is there a way of update the physics in the same way that it gets updated when the standard cube is moved by hand? Am I missing something in how gazebo works? Extra Data: ROS Version: kinetic GAzebo Version: 7.0

Thankyou